by Mitch Kokai
Senior Political Analyst, John Locke Foundation
If [Bill] de Blasio, the city’s elected public advocate, thinks New York can hike taxes on the rich and not suffer for it, he didn’t learn much from the 2008 crash. Gotham must become less dependent on the “top 1 percent” to be able to provide services to everyone in a downturn, not more.
De Blasio’s scheme is this: Hike income taxes by 13.8 percent on New Yorkers making above half a million dollars annually.
He’d use this bounty — $530 million a year — to pay for 38,177 pre-kindergarten students to go to school all day instead a half-day. He’d create 10,000 new pre-K slots, too.
The rest, $188 million, he’d spend on older kids’ after-school activities. After five years, de Blasio would let this tax surcharge lapse, and — he says — find another way to pay.
De Blasio’s plan has pushed him to frontrunner status in the Democratic primary.
But many voters don’t realize: We already spend $24.6 billion a year on education — 52.7 percent more, adjusted for inflation, than we did when Mayor Bloomberg took office nearly 12 years ago. …
… In 2009, the top 1 percent of taxpayers (the 34,598 households making above $493,439 annually) paid 43.2 percent of city income taxes (they made 33.9 percent of income), according to the city’s Independent Budget Office. Each of these families paid an average $75,477.
No, most people won’t up and leave (though if 20 percent did, they’d leave New York with less money than before the tax hike). But they can rearrange their incomes.
Unlike most of us, folks making, say, $10 million have considerable control over how and when they get paid. That’s because much of their money comes from cashing out a partnership, or selling stock or a house or a painting. To avoid a tax hike, it’s easy enough for them to pay themselves earlier by selling their stuff earlier — before the tax hike.
The city made $800 million in extra taxes last year because rich people sold their stuff before President Obama increased investment taxes in December.
Or, people can pay themselves later — after the five years’ worth of higher taxes are up. That’s if everything goes well. What if there’s another downturn?